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3 WAYS TO OPTIMIZE PRODUCT PRICING WITH
PSYCHOLOGY
Have you ever wondered how companies and
retailers set their prices?
The supply-and-demand laws have a large influence
over pricing, but there’s also something else…
PSYCHOLOGY
3main influences psychology has over pricing
There are
LEFT DIGIT ANCHORING EFFECTS AND 9-ENDING PRICES
#1
The tradition of prices ending in 9
--
$3.99 instead of $4.00)
--
originated to keep less-than-honest store
employees from pocketing dollar bills
9-ending prices are perceived as lower only when the dollar-place value
changes.
$3.99 is perceived as much lower than $4.00, but $3.69 is not perceived as
much lower than $3.70
399
What is the reasoning behind this?
As we look at numbers, we translate and map them onto a mental number line.
This effect is dampened when the comparison price is further away from the 9-ending price.
THE POWER OF ‘FREE’
#2
People love a discount. But even more, they love getting
things
In a pricing experiment,
more participants chose a free
Hershey’s Kiss over a
12-cent Lindt chocolate truffle.
How many times have you seen “FREE GIFT with $200
purchase” or “FREE SHIPPING on orders over $50?”
These schemes work because we are so drawn by the
buzzword “free.”
VALUE DICTATION
#3
Can price dictate value?
It seems logical that value should dictate price, but
that’s not always the case.
We get what we expect.
For example, research looking at participants’ neurological responses to wine found that being told a wine was more expensive leads to more activation in brain regions associated with feelings of pleasantness.
Comparison pricing is a widely-used strategy.
For example, many stores place their store brand item right next to brand name items.
Forcing a consumer to compare two differently priced substitutes forces
them to wonder why they are priced differently and they conclude the more
expensive one offers more value.
When do you find a discount most significant? When do you
dictate value over price?
Join our research team for our next Twitter chat:
Thursday, July 18
3:30pm (ET)
@tiptap #Psych4Marketers
